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STATE FARM MUT. AUTO. v. W.R. GRACE
October 26, 1993
STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., PLAINTIFF,
W.R. GRACE & CO., DEFENDANT.
The opinion of the court was delivered by: Richard Mills, District Judge:
Asbestos property-damage litigation.
Fifty day trial conducted piecemeal from January to August
End result: jury awards State Farm $17,889,632.47 damages,
but also finds State Farm thirty percent negligent.
Now before the Court, W.R. Grace's motions:
(1) to dismiss all claims as untimely filed under the
Illinois Construction Statute of Repose;
(3) for judgment after trial.
State Farm brought this action to recover the costs of
management, removal, and replacement of W.R. Grace's asbestos
containing fireproofing, Monokote-3 (MK3), from State Farm's
corporate headquarters in Bloomington, Illinois, and its
regional office buildings in Tempe, Arizona and Austin, Texas.
Construction of the three buildings took place between 1970
and 1973. State Farm originally sought damages based on the
legal theories of strict liability, negligence, fraudulent
misrepresentation, and willful and wanton misconduct. State
Farm's total prayer for compensatory damages for the three
buildings was $34,494,483.23. State Farm also sought punitive
damages from W.R. Grace.
State Farm's negligence Count averred that asbestos was not
necessary in MK3 and that when W.R. Grace was forced to
discontinue sales of MK3 in light of regulations promulgated
by the Environmental Protection Agency, it replaced the
asbestos with shredded paper fiber. State Farm also alleges
negligence because W.R. Grace never placed any warnings on
MK3, despite the fact that W.R. Grace had knowledge of the
harms of asbestos from: (a) its operation of an
asbestos-contaminated vermiculite mine and MK3 production
facilities (where workers were getting sick); and (b) its
involvement in the late 1960's with the public health debate
on asbestos. Despite this knowledge, State Farm alleges that
W.R. Grace continued to sell MK3 until the federal ban in July
1973, even though W.R. Grace had developed a non-asbestos
Monokote in 1970 and was selling it elsewhere.
W.R. Grace took the position that the harms from in-place
asbestos are greatly overstated. Specifically, W.R. Grace
alleged that documents produced by State Farm revealed that
airborne asbestos fiber levels in their buildings were well
within and below any applicable government standard,
demonstrating that W.R. Grace's fireproofing should not be
removed and could be managed with an effective operation and
Jurisdiction of this Court was invoked under 28 U.S.C. § 1332.
The trial was bifurcated. On May 11, 1993, the jury returned
a verdict on the liability phase of the trial. The jury
returned a verdict of guilty on State Farm's Count of
negligence and not guilty on State Farm's Counts of fraud,
strict liability, and willful and wanton conduct. In addition,
the jury found that State Farm was 30 percent contributorily
On August 26, 1993, the jury returned a verdict on the
damages phase of the trial. The jury assessed State Farm's
damages to be $17,889,632.47.
After the verdict, W.R. Grace moved for judgment as a matter
of law claiming that this suit should be barred because of the
Illinois Statute of Repose and the fact that the jury verdicts
were inconsistent. W.R. Grace also seeks a new trial for a
host of procedural and substantive issues.
II. Motion for Judgment as a Matter of Law
The Illinois Construction Statute of Repose states that:
No action based upon tort, contract, or otherwise
may be brought against any person for an act or
omission of such person in the design, planning,
supervision, observation, or management of
construction, or construction of an improvement
to real property after 10 years have elapsed from
the time of such act or omission.
Ill.Rev.Stat., ch. 110, ¶ 13-214(b).
Because State Farm's buildings were constructed between 1970
and 1972 and this suit was not brought until 1989, W.R. Grace
claims that the ten-year repose limit in this statute has
expired and the suit should be barred.
This marks the fifth time that the Court has considered
whether W.R. Grace is protected by this statute. On January 3,
1993, the Court denied W.R. Grace's motion for summary
judgment on this issue. At that time, the uncontested evidence
present in the record supported the finding that W.R. Grace
was a "mere manufacturer" of asbestos materials. This
distinction was important, we noted, because of the dicta in
Witham v. Whiting Corp., 975 F.2d 1342, 1346-47 (7th Cir.
1992). Witham was the only Seventh Circuit opinion at that time
which addressed the issue.
Despite the forecast in Witham, Illinois Supreme Court did
not resolve the issue. As a result, on January 15, 1993, this
Court denied W.R. Grace's motion for interlocutory appeal. At
issue was whether the Illinois Supreme Court opinion in St.
Louis v. Rockwell Graphic Systems, Inc., 153 Ill.2d 1, 178
Ill.Dec. 761, 605 N.E.2d 555 (1992), superseded the analysis of
Witham. With the question of whether manufacturers are included
within the statute of repose before it, the Illinois Supreme
Court remanded the case back to the trial court for a
determination of whether the equipment in question (a printing
press) was an improvement to real property. As a result, this
Court denied W.R. Grace's motion for interlocutory appeal
because neither party submitted evidence on the issue of
whether the asbestos was an improvement to property.
On April 22, 1993, the Court denied W.R. Grace's motion for
judgment as a matter of law. The Court found that the statute
of repose issue was extremely close and would be determined by
the extent to which W.R. Grace's involvement met the statutory
threshold of "design, planning, supervision or observation."
We noted that at least one federal court in our circuit had
excluded asbestos manufacturers from protection under the
statute of repose.*fn3 Nevertheless, we waited for a
definitive ruling from the Seventh Circuit or the Illinois
Finally, on May 26, 1993, we denied W.R. Grace's motion for
judgment as a matter of law after the liability portion of the
trial on this issue. We invited the parties to address two
issues in post-trial motions: (1) the legislative history
behind the statute of repose (was the statute intended to
protect only those who perform professional design and
construction activities?); and (2) statutory construction
(does the statute of repose protect only claims arising out of
"design, planning, supervision, or observation," of the
defendant, or all claims?).
2. Legislative and Judicial History
Contrary to Whitham's suggestion that the legislative history
of the statute of repose protects a class of defendants
(architects, engineers, and the like) and excludes another
class (manufacturers of products), we find that the statute of
repose does not exclude persons based upon their status.
Rather, the pivotal issue is whether the defendant engages in
the enumerated activities (i.e., was the defendant engaged in
the "design, planning, supervision, observation, or management
of construction," Ill.Rev.Stat. ch. 110, ¶ 13-214); Hausman v.
Monarch Machine Tool Co., 997 F.2d 351, 353-54 (7th Cir. 1993)
("`[m]ere labels are not dispositive' and section 13-214
protects, on its face, anyone who engages in the enumerated
activities." (citations omitted)).
The arbitrary quality of the statute clearly
appears when we consider the architects and
contractors are not the only persons whose
negligence in the construction of a building or
other improvement may cause damage to property or
injury to persons. If for example, four years after
a building is completed a cornice should fall
because the adhesive used was defective, the
manufacturer of the adhesive is granted no
immunity. And so it is with all others who furnish
materials used in the constructing the improvement.
But if the cornice fell because of defective design
or construction for which an architect or
contractor was responsible, immunity is granted.
Id. at 38 Ill.2d at 459-60, 231 N.E.2d at 590-91. (Court's
W.R. Grace argues that the above quotation demonstrates that
the Illinois Supreme Court intended a manufacturer of a basic
construction material (adhesive) to be protected under the
statute of repose. The Court does not agree. The Court's
conclusion is evident from the subsequent history of the
statute. In 1979, the Illinois legislature passed a new
statute of repose. The legislature eliminated the exclusivity
language of the original statute and expanded the protection
from untimely lawsuits to "any person" who, ten years or
later, is accused of wrongful acts or omissions related to an
improvement to real property.
This statute was again struck down by the Illinois Appellate
Court in People ex rel. Skinner v. Hellmuth, Obata & Kassabaum,
Inc., 135 Ill. App.3d 765, 90 Ill.Dec. 448, 482 N.E.2d 155
(1985) (Hellmuth I). After citing the language of § 13-214
which protects "design, planning, supervision, observation or
management of construction or construction of an improvement to
real property" (90 Ill. Dec. at 450, 482 N.E.2d at 157), the
panel recognized "again, the material provider whose product
was defective causing injury or damages has no immunity. . . ."
Id. at 452-53, 482 N.E.2d at 159-60. The court believed that
the exclusion of materialmen (and owners of property) from
protection was unconstitutional.
However, on appeal, the Illinois Supreme Court held that the
legislative classification which concerned the appellate panel
(exclusion of owners and materialmen) was not
unconstitutional. People ex. rel. Skinner v. Hellmuth, Obata &
Kassabaum, Inc., 114 Ill.2d 252, 102 Ill.Dec. 412,
500 N.E.2d 34 (1986) (Hellmuth II). The court deferred to the legislature
which it said could constitutionally classify "construction
activities separately from other activities." Id. 102 Ill.Dec.
at 416, 500 N.E.2d at 38. More importantly for our application,
Hellmuth II stated that the statute of repose did not include
or exclude persons "based upon their status (e.g. architect,
contractor, materialmen)." Id. 102 Ill.Dec. at 415, 500 N.E.2d
at 37. Rather, the court ruled that the statute of repose
protects only those who engage in the enumerated activities
protected by the statute: "design, planning, supervision,
observation or management of construction." In this ...